The Maryland-based company manufactures in the state, but spices come from around the world.
WASHINGTON — The spice that defines Maryland, Old Bay, is currently manufactured in the state, but the company that makes it, McCormick & Company, is facing a massive trade squeeze.
On Tuesday, the Hunt Valley-based giant told investors that current trade and tariff policies have created a substantial problem: a $140 million annualized gross tariff exposure. The company is navigating a complex trade environment that is making the cost of ingredients for its dozens of products, including the iconic Old Bay blend, significantly more expensive.
Why tariffs hit the spice aisle hardest
Why is a Maryland-made product susceptible to international tariffs? The answer lies in the global nature of the spice trade.
“The spice industry is uniquely impacted by the tariff issue because most spices that we use here in the United States simply can’t be grown here due to the climate conditions that are required,” explains Laura Shumow, Executive Director of the American Spice Trade Association (ASTA).
For example, a common spice found on nearly every American dinner table—black pepper—is not commercially grown in the U.S. Instead, it is typically imported from tropical regions like Vietnam, India, Brazil, Indonesia, and Malaysia.
The tariffs levied against these essential imports vary by country. Of particular concern are the high duties facing major producers. For spices from India, one of the top global suppliers, some imports are facing a 50% tariff rate—a figure that directly drives up the cost for U.S. manufacturers like McCormick.
McCormick’s “surgical approach” to pricing
McCormick and Company’s product portfolio is immense, containing roughly 17,000 ingredients sourced from 90 global markets. A spice blend like Old Bay contains multiple ingredients, the majority of which must be imported.
To manage the rising costs, McCormick has stated it is committed to keeping prices stable for consumers for as long as possible. A company spokesperson released the following statement regarding their strategy:
“We’re taking a very surgical approach to pricing and leveraging robust analytics and planning tools to ensure we maintain volume growth and continue to meet consumers’ and customers’ needs for both value and flavor.”
During the recent earnings call, company leaders confirmed they have not yet passed the full cost onto customers. However, industry experts warn that this absorption of costs is temporary.
Consumer price hikes are a “lagging indicator”
ASTA’s Laura Shumow notes that the increasing trade friction will inevitably trickle down to the consumer.
“Consumer price hikes are certainly a lagging indicator,” Shumow said. “We are expecting to start to see more price increases by the end of the year across the industry.”
As the $140 million problem continues to squeeze margins, the price for a can of Old Bay—and many other kitchen staples—may soon rise. If that happens, it might be the only time the Maryland favorite leaves a bitter taste.